More on the CBO Update: Making Smart Choices

August 25th, 2011 at 9:56 am

I posted earlier on some of the economics in the updated CBO report, but I want to highlight a couple of points from my CBPP colleague Jim Horney’s analysis.

Jim stresses two points. First, “…policymakers should not let legitimate concerns about deficits and debt in coming decades prevent them from pursuing policies to boost economic growth and increase jobs in the short run.” That’s something I’ve been stressing with practically every measure of chin music I play.

Here’s something that ran over in the New Republic on that theme, and I also did a segment tonight with Rachel Maddow on the FAST! (Fix America’s Schools Today) idea that denizens of these parts know well (link; there’s no idea that everybody’s going to like, but I keep running into people who really want to see this FAST! idea get enacted).

But his second point is just as important in the longer term: the analysis in the update “…puts the lie to claims that the only way to reduce deficits and debt over the next decade is with big new spending cuts.”

As the figure shows, following current law—CBO’s baseline—does more than stabilize the debt/GDP ratio—it gets it to come down.

How can this be? Well, the next figure answers that—they main factors driving deficits over the decade covered in the report are tax cuts slated to expire at the end of next year. And sure, if they expire, you achieve that nice reversal in the debt/GDP ratio at the end of the figure above. (BTW, even with no savings from the super-committee—no agreement, no automatic cuts—the debt still stabilizes and falls by the end of the budget period if the tax cuts sunset.)

OK, back in the real world, it’s widely accepted that these CBO projections are all very “stylized,” meaning they (very helpfully) account for moving budget parts along with some expectations about where the economy’s headed. If taxes go up as planned by law, the deficit goes down a lot. But neither party is advocating that—the administration wants only the high-end cuts to sunset, the R’s want a full extension forever. The deficit reduction from the super committee may or may not materialize—no current Congress can bind the actions of future Congresses (that’s why you always want to pay the most attention to the impact of the current and maybe the next year in these agreements).

So what good is a report like this? It’s a reality check. All day long in this town you hear people from both sides of the aisle arguing that we can’t achieve a sustainable budget without whacking Medicare and Social Security. That is patently wrong by this non-partisan analysis. Such cuts are in neither of the figures above. It is true, as the second figure shows, that we can’t get there without new revenues.

Too often these days, the rhetoric of these debates is that we simply can’t pursue a jobs agenda, we can’t repair the schools, we can’t afford retirement or health care security. But that is all pure, unadulterated, shovel-ready nonsense. We have a choice.

That’s what documents like this are really about. They lay out the options and we must choose the path that best suits the needs and wants of the nation. Granted, the information is not always accessible, which is why, if I may say so, places like the CBPP are so important.

But last I checked, making informed choices about matters like these are what democracies are supposed to be about. We’ve drifted far from that goal—perhaps as far as I’ve seen in my lifetime. We need to get back there, and FAST!

The only policy that will get the economy going again is for the government to spur aggregate demand (and get consumers spending again) by increasing employment via government spending in “smart” jobs programs like FAST.

It’s time for all of us to beat on our elected federal officials to get America back to work-ASAP.

On FAST: Several hundred New York City schools are among the few buildings left in America that still burn No. 4 and No. 6 residual fuel oil (bunker fuel or thin tar) as heating fuel. These schools, along with about 1% of all the other buildings in New York City, produce as much particulate pollution (PM2.5) as all the cars and trucks in NYC combined! They are also responsible for something like 90% of the heavy metal (i.e. nickel, etc.) air pollution in the city. While New York has a plan to convert these schools to cleaner fuels before 2030 (decades from now…) one hopes that a FAST program could dramatically accelerate the conversions and, as a result, drastically reduce the incidence of asthma, diabetes, and a wide variety of respiratory and coronary ailments in the city. (Note: Studies at NYU indicate that over 250 people die yearly as a result of dirty heating oil pollution in New York City.)

Conversion of buildings from oil to natural gas results in annual fuel savings of as much as 30%! Thus, even though up-front per-building conversion costs can be $100K or more, the payback period on such conversions is usually between 1 and 4 years. Thus, the IRR (Internal Rate of Return) on such conversions is dramatically higher than just about any other investment commonly available. If NYC Schools were to convert from bunker fuel to natural gas, they would not only dramatically reduce the pollution dumped on their students, but the resulting drop in operating expenses would free up money in future years that could be used to fund other needed upgrades, increased teachers’ salaries, etc. Also, given that gas is typically a domestic product, switching to gas would help the balance of payments… Frankly, whatever the environmental arguments for eliminating bunker fuel in NYC schools, the reality is that the economic arguments for replacing bunker fuel with natural gas are compelling on their own. But, given the city’s tight financial resources, a program like FAST! is probably necessary in order to eliminate the pollution and produce a revenue stream via energy efficiency savings.

I agree lets add solar hot water and radiant heated floors with gas backup, then solar the sun side walls. Then change out the windows and do whatever each building needs and needs will be different and that’s just in NY. This needs to be bigger than a coat of paint we need to think big like America use and not like Amerika does today. If 500 billion can’t be found then don’t bother, you’re just throwing a few dollar down a rat hole and all the charts in the world won’t make it better. I don’t see 0 or anyone in the congress being brave enough to stand up and really push for something that’s needed and when I hear Oh we’ll come back later and fix it, I just want to scream WTF. The people that serve an elected office do not serve the masters of ws but the people of this nation and the sooner that this group gets the message the sooner we could maybe do the impossible again. I doubt I’ll live to see that day at 62, I don’t have a lot of hope and haven’t for a long time, how sad.

While solar has all sorts of advantages, it should be realized that many school sites have a neglected resource in their playgrounds (or, the ground under them…). For those buildings that either have or could be converted to central heating or cooling, they would get vastly greater HVAC efficiency if they were to use ground-source heat pumps which exchange heat with the ground under their playgrounds rather than with the air (which is what is normally done.) Many existing buildings in urban settings would find it difficult to run the plumbing or wells needed for ground source heat pumps, but since most schools have some sort of outside play area, they are basically sitting next to an efficient and easily tapped source of heating and cooling. In many cases, the improved efficiency and thus lowered cost of cooling and heating might actually make it more economically feasible to keep school buildings open longer into the hot summer months. Thus, we might find that by putting heat exchangers under playgrounds, we not only make the buildings cheaper to operate but create new options for school schedules.

Works for me, here in the Central Valley of Calif. home owners have done this in reverse by running 24″ to 36″ plastic pipe 4 feet in the ground around the house it’s almost free AC. Like I said every site will be different and any advanage should be used. Then maybe with the saving we could hire more teachers, what concept.